Samizdata quote of the day

States love a few Big Businesses but hate lots of small ones… in essence, if there are more people who actually matter in an industry than can fit around a dinner table with the appropriate Government Minister, then clearly that is a sector that cannot be controlled by the state. And that is intolerable.

And of course many Big Businesses also rather like those sort of relationships as a few large competitors with a similar size-to-brain ratio as themselves are much preferred to a whole bunch of innovative small folk who names they don’t even know and who might actually start doing things they did not expect to have to deal with.

– Perry de Havilland

March 19th, 2013 |

13 comments to Samizdata quote of the day

There are reasons to both love and hate Michael O’Leary of Ryanair, but one of his more endearing characteristics is that if ministers or regulators invite him to come and sit at such a table with other important players in his industry (which is an industry with a small number of big players), he tells them to fuck off, sometimes with exactly those words.

What are the reasons to hate Michael O’Leary ? (Assuming you are not a senior EU official, some other member of the giant corporatist bureaucracy or an employee a high cost airline.)

For my part, the clip of him mercilessly shredding a BBC hack called Vivian White was the best thing I’ve seen on the BBC. Ever. Never mind Life on Earth. The BBC had wanted to interview him about Ryanair’s cheap’n nasty service standards (in the BBC’s view) and he had agreed subject to the condition that they agreed not to cut anything from the interview. He had told them they were welcome to specify the length of the interview. All he required was that they not cut anything. They refused, so he refused the interview. So the hapless White tried doorstepping him instead. Biiiig mistake. They’re still trying to get the bloodstains off the pavement. They didn’t show the full doorstep interview in the show, but to their credit they did post it, in full, on their website.

At first large business enterprises may benefit from cooperation with the state – its regulations will keep out competitors. But, in the end, even large enterprises lose.

For example, at first the Interstate Commerce Commission (established in 1887) maintained the cartels on American railroads (prevented anyone “cheating” by offering lower prices – as normal “competition policy”, like “anti trust” is AGAINST the interests of customers). However, the government regulations expanded (in both number and scope) till, in the end, the railroads were strangled by them.

A similar history could be given in many cases – in the short term government intervention may be in the interests of established enterprises, but in the longer term it is fatal.

But generally the managers of large companies are not employed in the longer term, just the medium turn. So what if regulation is going to strangle your industry in 25 years time. Better than some upstart competitor strangling it in 5 years time. So long as you can draw your pay and bonus for the ten to fifteen years you’re a main board director, and get a fully funded final salary pension scheme, the future can go hang.

After a century and a half of relentless attacks, it is astonishing to most people when I explain to them that the free market, labelled capitalism, is not about business owners, but about the people who are the object of all the effort required to create, develop, and produce a product or service—the customer.

The man in his chevy will laugh when told he’s the whole point of the system, when he sees the rich man in his mercedes drive by, but he only has to think back to when, before capitalism, only the rich could even afford a horse, and the common man walked barefoot to the fields where he labored for 12 or 14 backbreaking hours.

The woman in her dress from JC Penney might wonder, when she sees the rich matron in her $1000 frock, at my statement, until she recalls that her great-great-great grandmother had only one homemade dress, that she wore seven days a week while she made everything her family used from scratch, and matched her husband’s hours with her own labors.

The family, working diligently to buy and maintain their 3 bedroom house with its small yard and leaky roof, might object when comparing that structue with the huge mansions of the wealthy, until they recall that their ancestors lived in a hovel with one dirt floored room, in which a fire was the only heat, a candle was a luxury, and hot water was for special occasions only.

The worried mother waiting in the hospital emergency room for a doctor to examine her sick child might might complain that the rich don’t have to endure such rigors, until she remembers that Steve Jobs died at an early age from the same cancer that killed her father in his 90’s, and there were no secret “for the rich only” treatments that her child will be denied.

Businesses, as they mature, often have an attraction to the soothing mantle of state protections, licenses, entry barriers, and tax policies, among a myriad other discouragements that are thrown in the path of new competitors, preventing those upstarts with some new idea from disrupting the gravy train they planned to ride. It is built into the nature of most human beings to be drawn to the safe and unchallenging, even as it is part of some others’ psyche to get out and stir things up.

It is those stirrers who have brought ordinary people from their subsistence farms, and smoky, muscle powered workshops, and put them in air-conditioned offices, and then sent them home to houses and apartments more luxurious, and more healthy, in real terms, than the palaces of emperors and kings, to eat food of a quality and quantity which would make our ancestors weep with awe at such abundance.

We live in the land of milk and honey that human beings over millenia have dreamed of and prayed for, and we spit in the faces of those whose creativity and energy have made it possible.

Well, as I have said here before, I believe in a form of cosmic justice, and the reality that rewards the free and creative independent mind so lavishly when it is allowed to function, will also punish any society which closes off and represses those minds, and will do so with a terrible vengeance.

But it should not be forgotten that the very same “land of milk and honey” argument could be made (in general) at every point in history, with respect to the preceding periods, be they free market or other. And the same must be true today: that future generations will look back at our lifestyles – and judge them relatively primitive.

Though there are arguments that progress is more rapid under freer markets, there is progress no matter what. There is also the case that peace and law and order are requirements for societal advancement, be it based on technology, the prevailing behavioural norms, or both. There is also the counter case, that the progress has been greater over the period of increasing government expenditure in the First World (in the UK, from around 10% of GDP just before WW1 to well over 45% of GDP now).

Thus, IMHO, the arguments needs to be more refined.

We need to consider the amounts of technological infrastructure and of urbanisation. We also need to consider, for all the different things, at what level (eg national and local government – but it is a continuum from individual household to supra-national organisation) decisions are made and money is spent.

Ever more of what has been beneficial in the past is, without doubt, a foolhardy and simplistic policy. But today is not the same as yesterday, so yesterday’s totality of good policy is not necessarily as good today.

What the quotation from Perry does show is that reliance on corporatism can be bad, like reliance on socialism. In my mind, it is eventually the lack of flexibility that overcomes the benefits of economies of scale, standardisation, etc. This is present, whatever the more detailed arrangements, motivation and short-term beneficiaries.

Nigel, I’m sorry but I completely disagree. For uncounted millennia until the Industrial Revoluton really took hold, 99% of humanity lived at a bare subsistence level, mostly on tiny inefficient farms. There was no improvement from one generation to the next; children could look forward only to the same life of drudgery as their parents suffered. Industrialization created a general rise in living standards and a large, relatively propserous middle class (although it did take several generations for it to really kick in). And industrialization required capital. I think industrialization created most of that capital, rather than the other way around, but clearly the two phenemona are interrelated.

And your point that “progress has been greater over the period of increasing government expenditure in the First World” is a classic example of putting the cart before the horse. The growth in government did nothing (or very little, anyway) to improve general living standards. Government is a parasite which feeds off the efforts of the productive. The growth in government followed the general increase in wealth, rather than preceding (let alone causing it). A wealthier society can afford more government, just as it can afford more unproductive members (and ineffciency in general). That doesn’t mean that those unproductive members were responsible for the overall increase in wealth, and it doesn’t mean that government was, either.

I very much doubt that our descendants will consider our lifestyle “primitive”. To the contrary, I think we have reached (indeed, passed) the high water mark of societal wealth and individual freedom, and our descendants will look back upon ours as a golden age. But we have so fouled our nest (speaking in economic terms, not ecological ones) that a serious retrenchment, if not outright collapse, is well-nigh inevitable. The current level of government spending, waste, inefficiency and crony capitalism, as well as individual unproductivity and even sloth, are unsustainable. We are sinking into a decline which will take generations, if not centuries, to reverse.

I do agree that today is not the same as yesterday. That is not a good thing, though.

I’m with VR, who said it beautifully, and (mostly) with Laird, who defended VR’s statement strongly and effectively. (The point of disagreement is that I hope, HOPE, that in some number of centuries Mankind’s wheel will come round again and when it does, that those people will be able to advance far beyond us. It would be nice to think, though, that if it comes out that way they will honor us….)

And there certainly have been times in history when people have gone from a better to a worse standard of living. In the Dark Ages for instance, when the technology of the Romans had been forgotten.

And if things progress even under the worst of governments–where was the progress in the old USSR? All that I’m aware of is in military advance (using stolen technology or research), along with possibly some mathematics and maybe, I’m not sure, some medicine.

I haven’t seen a great deal of advance in the standard of living in Cuba, nor of progress in innovation either, and even less in North Korea….

In the final analysis, I think repression is the key to the millenia long stagnation of the human race, not only by the state, but also by cultural values which do not allow for any change in the way things are done, or who is allowed to do which task.

Men and women in previous societies were born into a fixed system which used some form of supernatural justification to declare that everything, and everyone, was fixed in their place. Of course this is a broad generalization, but it applies to a wide variety of cultures, and is truer more often than it is false by a large margin.

We talk of the industrial revolution, or the Renaissance, or the age of exploration as periods in history without always realizing that the significant common element in all of them was an expansion of freedom, both of thought, and of action.

We are now watching as several areas of the world try to navigate the turbulent waters of the transition from societies based on subsistence agriculture to economies based on the industrial system first developed in the western cultures over the last few centuries

I remember the confident claims of various experts in everything there ever was a few decades ago who stated that less developed societies simply needed to reach a takeoff point, and then the development of a modern economy would happen almost automatically. It has proved to be somewhat more complicated than that.

The missing ingredient that so many of the social planners seemed to discount, or miss altogether, was the freedom that the people of western societies had earned through centuries of thought, work, and bloodshed.

The scientific mind, the empirical method, the openness to both success and failure as natural outcomes, and, especially, the idea that an individual might decide to do something in a completely different way than had been done before, and not have to ask anyone’s permission to try it, these are the truly revolutionary elements that have transformed human society from the short, brutal, supernaturally terror filled darkness that used to envelope human kind, to the one which thinks of exploring the planets, and defeating age itself.

Governments, aligned with the cultural controls that justified and complemented them, repressed more than enhanced the development of societies, and it is no accident that now, in a world filled with progress, the most repressive regimes keep their captive peoples mired in poverty and privation, while they snarl at everyone around them, who they imagine in their fevered delusions are trying to destroy the paradise they have created.

As it turns out, there is a magic step which can lead to a takeoff point toward the development of a modern, industrial, high-tech society.

Unfortunately, it is also the step most feared and hated by all the various flavors of collectivist mentality that have gained sway around the globe—respecting the rights and liberties of the free and independent creative mind—and so they fight against it, and try to maneuver around it, and pretend it really doesn’t matter.

But one of the great lessons of the scientific revolution is that reality will not be denied, and cannot be wished out of existence, nor legislated out either.

We are approaching a great decision point in human affairs, and how that decision is made, as well as what it is, will be the deciding factors in the future course of the global culture we have created.

There is only one fundamental, essential rule which must be remembered at all times—the anti-mind is the anti-life.

Actually, VR, a useful precursor to that “magic step” is an adherence to the rule of law and a system of recognized, enforceable and respected property rights. See Hernando de Soto. That leads inexorably to other freedoms. One step at a time.

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